To make sure you are fulfilling your tax requirements as a business owner or self-employed individual, it is imperative that you complete your 1099 forms appropriately. You can use this form to report income that you have received in addition to your usual salary or earnings. However, mistakes are commonplace when filing your 1099, so here are some typical errors that you should steer clear of:
Failing to provide the correct recipient information
You must include information about the recipient of the money you are reporting when you file your 1099 forms. This information includes their name, address, and taxpayer identification number (TIN). It is crucial to ensure that this data is accurate and current because any errors may cause delays or other problems with how your forms are processed.
Incorrectly classifying workers
As an employer, identifying whether a person is an employee or an independent contractor will help you decide whether you actually need to file a 1099 form for them or not. An employee is someone who regularly works for you, and you have influence over how they carry out their duties. On the other hand, an independent contractor is a self-employed individual who works for you occasionally or on a sporadic basis. The IRS may impose fines if you improperly classify a worker.
Reporting "incorrect" income
It is important to resist the urge to "round down" the figures on your 1099 forms. Rounding down your income payment may seem like a simple change, but doing so can cause you to underreport your income, which can result in fines and interest charges. Even if it means declaring a marginally larger amount of income, it is always preferable to be exact and thorough with the information on your 1099 forms.
Failing to file on time
Unlike your usual tax deadline, the deadline for filing in your 1099 forms typically falls on the January 31st of year following the tax year in which the income was earned. The deadline will be extended to the next Monday or the following working day (in the instance that the Monday is a public holiday) if the usual deadline for your 1099 form falls on a weekend.
Failing to provide copies to the recipient
In addition to filing your 1099 forms with the IRS, you are also requires to provide copies of the forms to the recipients of that income that you are reporting. This usually requires sending the recipients paper copies of the form or at least an electronic copy if possible. Penalties and other repercussions may apply if the recipients are not given the required copies.
If you are having difficulties filing your 1099 forms, it may also be helpful to seek the advice of a tax professional to ensure that you are properly preparing and filing your 1099 forms. Our team at CPA Solutions is equipped to help you with your tax-filing needs. All you need to do is just drop us a message today!